German Stocks Drop; BMW, Deutsche Post and TUI Shares Decline

By Henrietta Rumberger

Sept. 4 (Bloomberg) -- German Stocks retreated for a second day on concern slowing economic growth and higher fuel costs will reduce earnings.

Bayerische Motoren Werke AG, the world's biggest luxury carmaker, led declines among German carmakers, slipping the most in more than a week, as oil rebounded from four days of losses. Deutsche Post AG, Europe's biggest postal service, fell 1.6 percent after a report said business at its DHL Express unit worsened. TUI AG, the German owner of Europe's largest travel business, slid 3.1 percent after Financial Times Deutschland said Deutsche Lufthansa AG, Thomas Cook Group Plc and TUI may fail in their negotiations to merge three charter and discount carriers.

The DAX Index decreased 110.32, or 1.7 percent, to 6,357.17 as of 3:13 p.m. in Frankfurt. DAX futures expiring in September sank 1.9 percent to 6,364.5. The HDAX Index of the country's 110 biggest companies lost 1.6 percent.

The European Central Bank maintained its benchmark interest rate at a seven-year high of 4.25 percent, as inflation concerns made it harder for policy makers to respond to the risk of recession. The benchmark DAX extended earlier losses after ECB President Jean-Claude Trichet said the level of inflation is ``worrying.''

``What we see today is that the worries about slowing economic growth persist,'' said Florian Weber, chief executive officer at German broker Schnigge Wertpapierhandelsbank AG in Dusseldorf. ``At the same time, the market is very much driven by individual company news.''

Deutsche Post

The benchmark index for German equities has declined 21 percent this year after the global economy cooled and the world's largest banks posted writedowns and credit losses of more than $500 billion.

Deutsche Post declined 25.5 cents to 16.055 euros. DHL Express's U.S. business of Europe's biggest postal service has developed worse than expected over the past months, Financial Times Deutschland reported, without saying where it got the information.

TUI lost 42.5 cents to 13.51 euros, the lowest in a week. Lufthansa, Europe's second-largest airline, slipped 31.5 cents, or 2 percent, to 15.25 euros. It's possible that only a combination between Thomas Cook's Condor and either TUI's TUIfly or Lufthansa's Germanwings will result from the talks, FTD said, citing unidentified people close to the negotiations. The chances of the three-way merger are less than 50 percent, it said.

Lufthansa, TUI, Thomas Cook

Cologne-based Lufthansa said Aug. 28 that it was in talks with the travel companies about merging the three carriers. Air Berlin Plc pulled out of an agreement to buy the Condor charter service in July.

Frank Puettmann, a spokesman for Lufthansa, declined to comment today on the status of the talks with TUI and Thomas Cook.

Separately, TUI will drop out of Germany's benchmark DAX Index and will be replaced by K+S AG, Europe's biggest producer of potash used in fertilizers, effective Sept. 22, Deutsche Boerse AG said yesterday.

Crude oil for October delivery gained as much as 1.1 percent to $110.60 a barrel in New York as Hurricane Ike strengthened in the Atlantic and the dollar declined, boosting the appeal of commodities as a hedge.

BMW fell 32 cents, or 1.1 percent, to 28.75 euros. Daimler AG retreated 55.5 cents, or 1.3 percent, to 42.065 euros, the biggest drop in a week. The world's second-largest luxury carmaker said U.S. sales of its Mercedes-Benz brand fell 12 percent in August as the industry struggled with a slowing domestic economy.

Volkswagen, Audi

Volkswagen AG slipped 3.07 euros, or 1.5 percent, to 202.54. Audi AG, the luxury auto brand of Europe's biggest carmaker, said separately that U.S. sales dropped 16 percent in August.

Car sales in the U.S. had their 10th straight monthly sales decline in August as consumers continued to snub trucks because of gasoline prices.

The following stocks also rose or fell in German markets. Symbols are in parentheses.

Aixtron AG (AIX GY), a German maker of machines to coat semiconductors, fell the most since June, tumbling 50 cents, or 7.1 percent, to 6.50 euros after Digitimes reported that Taiwan- based producers of light-emitting diodes postponed expansion plans.

The report is ``negative'' for Aixtron, CA Cheuvreux's Frankfurt-based analyst Klaus Ringel wrote in a note to investors today. The brokerage has an ``underperform'' recommendation on the stock.

Commerzbank AG (CBK GY) sank 27 cents, or 1.5 percent, to 17.51 euros. Germany's second-largest lender was cut to ``neutral'' from ``buy'' at Merrill Lynch & Co. after buying Dresdner Bank.

Homag Group AG (HG1 GY) sank 19 cents, or 1.1 percent, to 16.95 euros, the first decline this week. JPMorgan Chase & Co. lowered its recommendation on shares of the German maker of woodworking machinery to ``neutral'' from ``overweight.''

Kontron AG (KBC GY) fell for a second day, falling 12 cents, or 1.4 percent, to 8.41 euros. Hannes Niederhauser, co-founder and supervisory board member of the German miniature-computer maker, sold shares worth 1.81 million euros ($2.62 million).

Siemens AG (SIE GY), Europe's largest engineering company, led a decline in industrial companies after German factory orders unexpectedly fell in July, extending their longest ever declining streak and increasing the likelihood that Europe's largest economy is heading for a recession. Siemens decreased 2.36 euros, or 3.2 percent, to 71.94. ThyssenKrupp AG, Germany's largest steelmaker, dropped 92 cents, or 2.9 percent, to 30.86 euros.

To contact the reporter on this story: Henrietta Rumberger in Frankfurt at hrumberger@bloomberg.net.